Australian Energy Market Operator

AEMO operates Australia's National Electricity Market (NEM), the interconnected power system in Australia’s eastern and south-eastern seaboard, and the Wholesale Electricity Market (WEM) and power system in Western Australia.

AEMO operates gas retail markets in New South Wales and the Australian Capital Territory, Queensland, South Australia, Victoria, and Western Australia. AEMO also operates wholesale gas markets in south-eastern Australia, those being the Declared Wholesale Gas Market in Victoria (DWGM), the Short Term Trading Market in Adelaide, Brisbane and Sydney (STTM), and the Gas Supply Hub (GSH), whose trading locations are based at Wallumbilla in Queensland, and Moomba in South Australia. AEMO also operates the Natural Gas Services Bulletin Board (GBB), and is system operator of the Victorian Gas Declared Transmission System. AEMO is also responsible for Gas Services Information functions in Western Australia.

Benchmark reserve capacity price

The Benchmark Reserve Capacity Price (BRCP) is used in the calculation of the maximum price that may be offered in a Reserve Capacity Auction, or as an input in the calculation of the administered Reserve Capacity Price if an auction is not required. Each year, AEMO is required to determine the BRCP in accordance with the Market Procedure: Maximum Reserve Capacity Price.

The BRCP aims to establish the marginal cost of providing additional reserve capacity in each Capacity Year. The BRCP is calculated by undertaking a technical, bottom-up cost evaluation of the entry of a 160 MW open-cycle gas turbine generation facility in the South West interconnected System in the relevant Capacity Year.

The steps AEMO follows to complete the annual review of the BRCP are:

Calculate the draft value of the BRCP and publish the results in a draft report.

Request public submissions on the draft report.

Assess public submissions and adjust the BRCP if appropriate.

Submit the final value of the BRCP in a final report to the Economic Regulation Authority (ERA) for approval.

Publish the final report once it has been approved by the ERA.

Historical Benchmark Reserve Capacity Prices

The BRCP was set at $150,000 per MW per year for the first Reserve Capacity Cycle, applying from market start to 1 October 2008. The figure below shows the breakdown of the cost components of the BRCP for the 2008–09 to 2020–21 Capacity Year.

The table below shows the BRCP and Reserve Capacity Price for each Capacity Year since market start. The Reserve Capacity Price is paid by AEMO for Capacity Credits not traded between Market Participants.

Capacity Year

BRCP ($ per MW per year)

Reserve Capacity Price ($ per MW per year)

2020–21

$153,600

2019–20

$149,800

$126,683.47

2018–19

$159,800

$138,760.39

2017–18

$164,800

$111,752.53

2016–17

$176,800

$121,888.94

2015–16

$157,000

$120,199.31

2014–15

$163,900

$122,427.87

2013–14

$240,600

$178,476.69

2012–13

$238,500

$186,001.04

2011–12

$164,100

$131,804.58

2010–11

$173,400

$144,235.38

2009–10

$142,200

$108,458.57

2008–09

$122,500

$97,834.89

2007–08

$150,000

$127,500.00

2006–07

$150,000

$127,500.00

2005–06

$150,000

$127,500.00

2018 Benchmark Reserve Capacity Price

AEMO has completed its final determination of the 2018 Benchmark Reserve Capacity Price (BRCP). The BRCP for the 2018 Reserve Capacity Cycle will be effective for the 2020-21 Capacity Year, which starts on 1 October 2020 and ends on 1 October 2021.

AEMO proposed a final value of $153,600 per MW per year to the Economic Regulation Authority (ERA).

This value was approved by the ERA on 29 January 2018 in accordance with clause 2.26 of the Wholesale Electricity Market Rules

Submissions received during public consultation period

Previous Benchmark Reserve Capacity Prices (before 2017)

Five-yearly methodology review

RELATED INFORMATION

The Economic Regulation Authority is required to review the Market Procedure: Maximum Reserve Capacity Price at least once every five years (clause 4.16.9 of the Market Rules). This review was last completed in 2011 by the Maximum Reserve Capacity Price Working Group.

As a result of the last review, the IMO developed a Procedure Change Proposal to amend the Market Procedure. The amended Market Procedure commenced in October 2011. The Procedure Change Proposal and related documents can be found here.